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It’s been going around the office that Microsoft has admitted failure, Paul Grahm even thinks Microsoft is dead, but I’m not convinced. Loss of relevance; sure, but death, failure, I don’t think so. From the Inquirer,

Dell announced that it would be offering XP again on home PCs. The second that Vista came out, Microsoft makes it very hard for you to sell anything other than Me II. It can’t do this on the business side because it would be laughed out the door, but for the walking sheep class, well, you take what you are shovelled. [...] What happened is, the OEMs revolted in the background and forced Microsoft’s hand. This is a big neon sign above Me II saying ‘FAILURE’. Blink blink blink. OK, Me II won’t fail, Microsoft has OEMs whipped and threatened into a corner, it will sell, but you can almost hear the defectors marching toward Linux. This is a watershed.

First, let’s face it, no one’s marching towards Linux. We’re totally avoiding Linux by backtracking and using Windows XP. People don’t like change and that’s what this boils down to. This shouldn’t even be seen as a failure, it’s really a conflict of interests. Microsoft has an interest in pushing people to move to their newer OS, hardware manufacturers have an interest in seeing that you don’t move; a new OS means a new investment in development. Neither probably has your best interests in mind. Let’s not mistake someone else’s interests for our own.

The other equally monumental Me II failure? Gates in China launching a $3 version of bundled XP. [...] What did MS do? It dropped the price about 100x or so. I can’t say this is unprecedented, when it made Office 2003 hard to pirate it had to backpedal with the student edition for about $150. This time though, things are much more desperate.

Dropping the price of an OS in China seems like an obvious choice. Clearly the price of Microsoft’s OS was too high, why not drop it and continue to make a profit. Plus, we get people used to paying for software. It’s never really explained why the Inquirer sees this as a failure.

The bottom line; Microsoft is generating a ton of profit.